New hope has emerged for home buyers with interest rates set to drop in response to a series of predicted cuts to the official cash rate.
The Reserve Bank is expected to cut the official cash rate from 3.25 to 3 per cent tomorrow - helping more people into the property market, local experts say.
The markets regard it as virtually certain that the Reserve Bank will cut the official cash rate tomorrow and many economists are predicting the cuts to continue - some expecting it to reach 2 per cent by the end of the year.
This reflects a combination of falling export dairy prices, feeble inflationary pressures and a deterioration of business and consumer confidence.
Rothbury Mortgage adviser Josh Martin said the predicted cuts would present an opportunity for first-home buyers to get in to the market. "A lower cost of borrowing is making mortgages more affordable across the country. This helps to offset the increase in property prices which is good news for first-home buyers who otherwise might have been shut out."
However, he did not see any immediate change fixed rates.
"Lenders have already factored in a further cut to the OCR in their previous fixed rate announcements, the floating rate, however, will drop if the OCR does," he said.
If the rate continued to drop later in the year as predicted then fixed term interest rates might begin to follow, he said.
He also said that when loan applications were considered for approval, they were calculated at an interest rate of about 7.5 for long-term safeguarding, despite whatever the current interest rate was.
Ross Stanway, chief executive of Realty Services, which operates Eves and Bayleys Real Estate, said it would bring more people into the market.
Ideally, to keep up with demand, it would also spur on more home owners who had been considering selling to make the move when they saw a busy buyer's market.
By Rebecca Savory - Bay of Plenty Times